About Us

Eyes on Trade is a blog by the staff of Public Citizen's Global Trade Watch (GTW) division. GTW aims to promote democracy by challenging corporate globalization, arguing that the current globalization model is neither a random inevitability nor "free trade." Eyes on Trade is a space for interested parties to share information about globalization and trade issues, and in particular for us to share our watchdogging insights with you! GTW director Lori Wallach's initial post explains it all.

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August 31, 2007

Indispensable reading: Why We're Signing a Panama FTA

In case you wondered why the Bush administration would go through all the trouble to sign a trade pact with Panama (where, as we've been reporting, major FTA-related labor disputes are underway), you MUST read Peter Riggs' latest piece for Tax Justice USA. Here's a sneak peak:

The proposed bilateral trade agreement with Panama
has skated through without much attention at all. But the agreement with Panama
is highly significant. The problem is, the trade agreement with Panama isn't
really about trade. It's about foreign investor rights, money laundering, and
tax dodging. And the United States should in no way reward this notorious
offshore tax haven with a "gold star" Free Trade Agreement...

Panama has two major areas of "economic comparative
advantage" in the region. One, obviously, is the Canal. But the other is
much more insidious-and major U.S. corporations are hoping that no one draws
any attention to it.

Panama's other economic comparative advantages are in the
area of tax and banking secrecy, and the ease with which U.S. companies can
create subsidiaries in Panama for purposes of dodging taxes.

Panama is already home to a lot of U.S. corporate
subsidiaries. How many? Tens of thousands of U.S. corporations have hung out a
shingle-or should we say, set up an email box-in that country.

Panama boasts a total of 400,000 registered
corporations-second only to Hong Kong as a home to corporations and corporate
subsidiaries. Subsidiaries whose sole purpose, in many cases, is to help
transnational companies avoid taxes...

A final consideration is this-with the text of the Free
Trade Agreement as it now stands, Panamanian investors would get new rights in
the United States, with no new disclosure responsibilities at home. We have a situation
where it is very, very easy to set up a business subsidiary in Panama. Panama's
"corporate" specialists advertise the country has having the most
favorable and flexible incorporation laws in the world, in addition to some of
the strictest banking secrecy laws available.

So the FTA will just encourage more U.S. businesses to
pursue a strategy for tax purposes, designed solely to evade taxes in the
United States. But then the text of the Panama agreement allows corporations
and investors with a "substantial business presence" in Panama-that
is, registered subsidiaries of multinational corporations-to use provisions
found in Chapter 10 of the agreement to bring a claim against U.S. laws using
an international investor tribunal. Panamanian-registered corporations would be
able to bypass the U.S. courts system altogether in the case of an investment
dispute involving the United States.

That's right, Panamanian corporations-as well as Panamanian subsidiaries of U.S. corporations-would be
able to bypass the U.S. legal system, and take their claims to an international
investor tribunal. Historically, these tribunals have proven much more
sympathetic to corporate interests than they have to public-interest
regulation.

Claiming the Moral High Ground on Product Safety

In the ongoing debates about how to strengthen food safety - a GLOBAL problem, not just a Chinese problem - one aspect is often ignored in the public discussion. From Inside U.S. Trade,

[Consumer Product Safety Commission commissioner Thomas] Moore pointed out a hole in current U.S. statutes on CPSC oversight of goods bound solely for export. “Our agency, through our governing statutes, cannot claim much moral superiority over the Chinese, or any other foreign country, when it comes to our own export policy. As long as a product has not been offered for sale in the United States, but is only made for export, our statute gives us practically no authority over it,” Moore stated. CPSC does not have the resources that would be required to know every country’s mandatory or voluntary product standards, and ensure that American exporters comply with them, he said.

“Given this background, it is somewhat hypocritical of us to berate any other country for not requiring their manufacturers to abide by the myriad U.S. mandatory and voluntary product safety standards,” he said. In light of this, Moore asks Congress to reexamine export policy and consider giving the Commission broader powers to prevent the exportation of products that have been recalled in the U.S.

As the Basel Action Network has been raising for years, there is a major problem in this country with exporting trash and other undesirable items to developing nations. This must certainly be one prong in any CPSC overhaul.

That, and, oh yeah, did I mention that the CPSC only has 15 STAFF to monitor imported procuct safety at ALL PORTS OF ENTRY INTO THE U.S. MARKET!!!!!!!!!!!!!! Witness, just one more lovely outcome of neoliberals' brilliant and enlightened view of government.

Why is NAFTA interfering with our transportation policy?

Five groups sued today in federal court to block a Bush
administration plan to allow Mexico-domiciled trucks to roam the
country’s highways as soon as Saturday.

The suit, filed in the U.S. Court of Appeals for the Ninth Circuit
in San Francisco, maintains that the Bush administration’s pilot
program, which authorizes up to 100 carriers based in Mexico to perform
long-haul operations within the U.S., violates several key
congressional requirements. The groups filing suit include Public
Citizen; the International Brotherhood of Teamsters; Sierra Club;
Environmental Law Foundation; and the Brotherhood of Teamsters, Auto
and Truck Drivers, Local 70. The groups filed an emergency motion
asking the court to delay the pilot program before it goes into effect
in a matter of days...

In 2001, a NAFTA tribunal ordered the U.S. to fully open its border
to Mexico-domiciled trucking companies. In response, the Bush
administration said it would implement a pilot program to allow up to
100 motor carriers from Mexico full access to U.S. highways. However,
the project violated U.S. laws governing the conduct of pilot programs,
in addition to a 2001 congressional mandate that Mexico-domiciled
trucking companies meet U.S. safety standards regarding hours of
service, driver training and licensing, and vehicle safety before being
allowed access to the nation’s roadways.

Congress this year held hearings examining the plan to allow trucks
from Mexico to travel beyond the border zones. Lawmakers uncovered
serious safety deficiencies and deemed the pilot program a sham and in
violation of existing law. In response, Congress passed a measure
designed to ensure that any pilot program does not circumvent safety
standards or congressional oversight and that such a program is
conducted within strict parameters designed to facilitate informed
decision making.

On Aug. 6, the Department of Transportation Inspector General
released a report finding that the system used to monitor
Mexico-domiciled carrier drivers with license convictions is not yet
adequate. Officials still don’t have the data necessary to identify
drivers not permitted to operate on U.S. highways. Further, the system
designed to ensure that Mexico-domiciled carriers comply with U.S.
motor vehicle manufacturing safety standards is incomplete, and it is
not clear whether the drug and alcohol testing program is functional,
the inspector general found.

This ain't about Mexican or American people, folks, cuz its mostly U.S. multinationals that operate in Mexico and are the ones pushing the NAFTA attack on safety standards. Welcome to neoliberalism, where any channel is as good as the next if the cause is deregulation.

August 29, 2007

The Times had this interesting story this morning, again raising questions of exactly where the buck stops for consumer protection in the global economy, and whether corporations can meaningfully self-correct in this rotten system they helped build:

Mattel makes its best-known toys, like Barbie dolls, in its own 12
factories. But even as it has increased the share of toys it makes
itself to about half, it still relies on roughly 30 to 40 vendors to
make the other half. Mattel now realizes it was not watching those
companies closely enough, executives here said.

Mattel vetted the contractors, but it did not fully understand the
extent to which some had in turn subcontracted to other companies —
which in turn had subcontracted to even more. Mattel required its
vendors to list subcontractors, so Mattel could visit them, but Mattel
is investigating whether that procedure has been followed. A number of
companies whose factories Mattel had never visited may have had a hand
in making the toys that were shipped around the world...

Mattel executives in Hong Kong are trying to figure out how many
subcontractors became part of its lineup...

“There aren’t many companies that own their own factories,” Mr.
Eckert said in an interview in his office, “and there aren’t many
companies that manufacture outside of China.”

Mattel closed its last American factory, originally part of the
Fisher-Price division, in 2002. The bulk of its products have long been
made in Asia.

Indeed, as this graph I put together below shows, since the worst boy band ever helped pass China PNTR, China (with all the accompanying safety/transparency problems common to authoritarian states) is rapidly overtaking all other countries (especially North American and Western European countries) in U.S. toy imports.

August 27, 2007

We are the "world's biggest loser"

Manufacturing News today (sorry, not linkable) says that the U.S. is the "world's biggest loser - by far" in terms of the WTO dispute resolution system.

The World Trade Organization has ruled against the United States in 40 of 47 cases... That number is "astounding," according to Robert Lighthizer, a partner in charge the international trade group at the law firm of Skadden Arps Slate Meagher & Flom. The United States "has suffered disproportionately from the problems with the WTO dispute settlement system, having been named as a defendant in far more cases than any other WTO members."

(Note that Public Citizen's dispute database shows that the United States has lost 43 of 50 cases. Since Manufacturing News doesn't elaborate further on its statistics, we're not sure where the discrepancy arises.) Lighthizer goes on to say,

"As a result of this judicial activism, our trading partners have been able to achieve through litigation what they could never achieve through negotiation... The consequent loss of sovereignty for the United States in its ability to enact and enforce laws for the benefit of the American people has been staggering. The WTO has increasingly seen fit to sit in judgment of sovereign acts running the gamut from U.S. tax policy to environmental measures to public morals."

All this is true, but it's not just the United States that loses at the WTO. Pretty much all defendants lose WTO disputes. According to Public Citizen's WTO disputes database, while the United States has lost 86 percent of its cases as a defendant under the WTO Dispute Settlement Understanding (DSU), out of all DSU cases, the defendant loses 88.7 percent of the time. So the United States is roughly in line with the rest of the world in terms of having its domestic laws overriden by the WTO.

So claiming the United States loses at the WTO is accurate, but also misses the bigger picture a bit. As Dani Rodrik says as quoted in my earlier post, what's really needed is to rethink the whole system.

August 24, 2007

CAFTA socks it to Aderholt

Our last update on the Aderholt-sock situation was a few months ago. Today, Inside U.S. Trade (as usual, not linkable) has this:

"Honduras this month rejected U.S. proposals aimed at reaching a negotiated settlement in advance of the public announcement of the injury investigation that could pave the way for the U.S. to invoke a Central America Free Trade Agreement (CAFTA) textile safeguard that re-imposes duties on Honduran wool, man-made fiber and cotton socks, according to a Honduran official... Honduras, the official said, was not receptive to any of the proposals and did not make any proposals of its own."

As we've described before both on this blog and in a 2005 release, this is mostly about a promise that Rep. Robert Aderholt (R-Ala.) received from the Bush administration that they would seek to limit CAFTA imports of socks by phasing out tariffs over 10 years instead of immediately. Aderholt, in return for this promise, voted for CAFTA despite expressing concerns that it would kill jobs in his district just weeks before.

Now, to no one's surprise except maybe Aderholt's, CAFTA is killing jobs in the U.S. sock industry and the promise made to Aderholt remains unfulfilled, and seems like it will remain that way for a while. In the meantime, the jobs they're a-movin':

The Federal Register notice states that of all three sock import categories, Honduras’ imports rose from 6 percent in the year ending June 2006 to 8.3 percent in the year ending June 2007, while U.S. domestic market share in all three categories has fallen from 36.6 percent in the year to date March 2006, to 29.1 percent in year to date March 2007.

August 23, 2007

Peruvian labor unions skeptical that "deal" will have real impact

Last week, Inside U.S. Trade published an article (sorry, not linkable) on Peruvian labor unions expressing concern that the labor improvements to the Peru FTA mandated by the Deathstar Deal might be more mirage than reality. House Democratic leaders have conceded that the Peruvian government does not have to implement the necessary changes through legislation, but instead by "supreme decree" from President Alan García.

"[Labor union sources] said the commitment is limited because it does not change Peruvian labor laws through legislation, and because many of the problems regarding labor rights are related to a lack of capacity or political will for effective enforcement. For these reasons, one source said the decrees would only be a 'gesture' to the United States.

"These labor sources said real improvements in labor rights would be achieved by the completion of a new, consolidated general labor law. Negotiations on the law, conducted between employers, employees and the government for the past five years, stalled one month ago despite having finished about 90 percent of the substantive negotiations. One of the issues that remain unresolved involves the terms under which employees can be fired, sources said."

Also, just a few days ago, the Peruvian labor movement released a letter to the U.S. Congress (PDF, translated to English) expressing these concerns and explicitly asking members of Congress to vote "no" on the Peru FTA.

WTO dispute system under fire

Today's New York Times has a lengthy article about the U.S.-Antigua gambling case at the WTO. It's unclear why they chose to run the article today, given there isn't any actual new news right now, but it's an interesting story about the dilemma that the WTO faces in trying to enforce its own rules.

On his blog, Dani Rodrik responds to the article by questioning whether the WTO should have jurisdiction over this kind of domestic policy at all:

To me, this is another example of how existing WTO practices are leading to the narrowing of policy space to the detriment of legitimacy (and economic logic). When the system serves to enforce new restrictions on domestic policy autonomy that would be wildly unpopular at home, it is time to rethink the system.

August 22, 2007

Murder in Panama

We all know that Colombia doesn't exactly have the best track record when it comes to labor rights or prosecuting goons who murder trade unionists. But flying a little lower and escaping any major press coverage are the recent murders of labor union workers in Panama. In the space of three days last week, two members of the 60,000-member construction workers' union SUNTRACS were killed, one by a police officer and one by a "company union goon" (reports our staffer currently in Panama, where he is supposed to be on a surfing vacation). There have since been several protests, including a massive strike called by SUNTRACS yesterday.

We are tracking the labor situation in Panama (which is extremely convoluted), and will post updates as new developments happen. Obviously this should have ramifications for any serious Panama FTA debate if and when it happens.

August 15, 2007

Separately, laboratory tests have found that some Chinese-made vinyl
baby bibs sold at Toys “R” Us stores appear to be contaminated with
lead.

Industry analysts said Mattel’s woes are part of a much larger problem.

“If I went down the shelves of Wal-Mart
and tested everything, I’m going to find serious problems,” said Sean
McGowan, managing director and the toy analyst at Wedbush Morgan
Securities. “The idea that Mattel — with its high standards — has a
bigger problem than everybody else is laughable. If we don’t see an
increase of recalls in this industry, then it’s a case of denial.”

Even Mattel executives said repeatedly yesterday that the company may have more recalls.

“No
system is perfect,” Robert A. Eckert, Mattel’s chairman and chief
executive, said in a conference call. “There’s no guarantee that we
will not be here again.”

Wow. Before yesterday, these mega corporations were saying, oh, it's
just a few bad apples caught up in the supply chain. (Kinda like Enron... remember that?) Now, we have the mega-corps admitting that - no, actually it's part of the design
of the system.

System?! You mean it's not just a few bad apples? How could such a "system" have ever been devised? Did
anyone ever vote on this "system", because I can't imagine it would be
popular among anyone that, well, eats or consumes. Oh, that's right - thanks Billy, Joey, Chrissy, Johnny, Sammy, Freddy, and Johnny, also known as the boy band of former and perhaps future presidents. (They unfortunately lack many of the redeeming qualities of those other boyz' bands.)

For an excellent read into what a stupid (in the dictionary definition of the term) SYSTEM we have now,
please check out Barry Lynn's piece in Harpers on the madness of mega-corporations'
unregulated, global sourcing strategies.

August 14, 2007

Choking on Barbie and Pixar Toys? - Thank the WTO

Mattel just announced its second August recall - one of history's largest with over 18 million toys globally, about 12 times the size of its previous recall. From Reuters:

The new recall involves 18.2 million magnetic toys globally,
including 9.5 million in the United States. All have magnets or
magnetic parts that can be dislodged.

The U.S. Consumer Product Safety Commission said it had received
hundreds of reports of magnets coming loose. It said it had previously
received reports of three children
swallowing more than one magnet and
suffering intestinal perforations that required surgery. When more than
one magnet is swallowed, the magnets can attract each other and cause
intestinal perforation or blockage, which can be fatal.

In the United States, the recall includes 7.3 million Polly Pocket
dolls and accessories with magnets, 1 million Doggie Day Care magnetic
toys, 683,000 Barbie and Tanner magnetic toys, and 345,000 Batman and
One Piece play sets.

About 253,000 Pixar Sarge die-cast toy cars with lead paint were
also recalled. Lead has been linked to health problems in children,
including brain damage.

Earlier this month Mattel's Fisher-Price unit recalled about 1.5
million preschool toys made by China-based contract manufacturer Lida
Toy Co. because the paint on the toys might contain excessive amounts
of lead. The global recall included products based on popular preschool
characters from "Sesame Street" and "Dora the Explorer."

These
import safety scares are the direct result of a trade policy that has
off-shored more and more food and product production to countries with weaker regulation than our already inadequate domestic regulation. 80% of our seafood now comes from abroad; 80% of toy production is
now Made in China.

It’d
be easy to blame China,
but the problem is much deeper. For decades, both Republican and Democratic
administrations have pushed trade agreements which put limits on our ability to
inspect imports. Under World Trade Organization rules, negotiated by the first
President Bush and pushed through Congress by President Clinton, we can’t treat
products differently if they come from outside the U.S., and we can’t demand higher
rates of inspection for problem countries. Clinton also pushed China into the
WTO – a move that was supported by all the senators now running for president
that were in office in 2000 – so that
means the bad rules apply to mega-manufacturer China as well. Now, Congress is poised
to lock in more-of-the-same through NAFTA expansion agreements to Peru and Panama - countries with severe food safety problems. As Newt Gingrich would say,
“Had enough? Call your congressperson!”

August 13, 2007

The NAFTA Superhighway: Myth and Reality

At Global Trade Watch, we get a lot of panicky calls from folks worried stiff about the so-called NAFTA Superhighway and its sinister cousins, the Security and Prosperity Partnership (SPP) and the North American Union (NAU). (Almost as many as people wanting information about how to "get their goods out of the docks" - seriously.) What exactly are these things? Stephen Colbert gets truthy with it:

Humor aside, there actually are pieces of this story that are worth taking seriously. As described in an excellent Christopher Hayes article in The Nation, the "Trans-Texas Corridor" (TTC) is exactly like the NAFTA Superhighway, except it's real. At an estimated cost of $185 billion, the TTC is proposed to be "4,000 miles of highway, rail and freight corridors... up to four football fields wide at points, paving over as much as half a million acres of Texas countryside. The first section will be built and operated by a foreign enterprise, and when completed it would likely be the largest privatized toll road in the country." Read the Hayes article for the full background on the TTC, as well as background on the SPP/NAU conspiracy theories.

There are much more concrete problems that require our attention, as Hayes describes after the jump:

August 10, 2007

USTR Stumping in Oregon

The presidential candidates aren't the only ones on the campaign trail talking about trade these days. Evidently, U.S. Trade Representative Susan C. Schwab has decided it's a good use
of her time and our taxpayer dollars to be stumping for the Bush trade agenda, calling
NAFTA-expansion deals to Peru, Panama and Colombia "no-brainers" while she was in Portland, Oregon.

Who is she kidding? After having lived through over a decade of NAFTA, we know these types of trade
agreements simply have not helped regular people. They've resulted instead in
the off-shoring of American jobs and the suppression of domestic wages - not to
mention providing outrageous rights to foreign corporations through NAFTA Ch.
11-type investment chapters, prohibiting "Buy America" or anti-off-shoring
policies here at home and exacerbating our imported food safety problem.

Arthur Stamoulis from the Oregon Fair Trade Campaign sums it up by saying, "Any member
of Congress from the Pacific Northwest would be nuts to support the Bush
administration trade agenda."

Why is the WTO interfering with our food safety??

And now that some members of Congress are actually trying to do something to improve our food safety, WTO/trade rules are getting in the way. This from today's Inside U.S. Trade:

Durbin has also made an effort to explain ... his pending legislation that would increase Food and Drug Administration (FDA) inspections in the wake of tainted food imports from China. The bill would impose an import user fee to pay for increased FDA inspections to ensure food safety and require foreign exporters to be certified as meeting standards equivalent to those of the U.S...

If a domestic user fee system was also implemented, it could take care of some questions over World Trade Organization (WTO) compliance, as sources said that a user fee for importers could violate international obligations to give foreign producers national treatment in Article 3 of the General Agreement on Tariffs and Trade.

An informed source pointed out that unless 100 percent of all import shipments are inspected, the measure could be challenged in the WTO as importers could allege they did not receive the ‘service’ of having their shipments inspected and therefore, should not be obliged to pay for it. A previous WTO case against U.S. customs user fees established that they can be charged as long as they are based on the cost of performing the service and not based on the cost of the good.

Regardless of one thinks of the Durbin bill - or whether one even knows anything about it (some parts are good, but the user fees are controversial, and the "equivalent" rather than "equal" standard is very problematic - read our report for more) - it is clear that WTO rules which require that a country either:

do nothing (inspect nothing, make no charges) or

do the logistically/politically impossible (inspect ALL imports and domestic products, charge EVERY producer foreign and domestic a user fee - let's see how the food companies ramp up lobbying on that one) or

do the highly byzantine (require an already underfunded and understaffed federal agency to keep records on each shipment, whether they were inspected, how much it costed them to perform the inspection, whether a fee was collected, etc. - but do so in a way that doesn't single out problem countries, etc.)

make any improvements in imported food safety in the real world a very difficult if not impossible proposition. The WTO and NAFTA expansions are coming to dinner (PDF), and it's not pretty.

August 09, 2007

How the prez candidates actually vote

The blogosphere has been alight with analysis of the presidential field on trade, both on the right and the left. But how have these candidates actually voted on the major trade issues?

Here are their fair trade vote records of those candidates that served in Congress, with a listing of where they went right, and wrong. And with so many candidates that served before 1990 (where we usually cut off our vote counter), we decided to go digging into the archives back as far as we could… to Richard Nixon’s original Fast Track House vote in 1973.

I make no attempt to weight the votes, or to account for the number of votes. So Joe Biden, who has made 15 bad trade votes, is listed as having a higher fair trade percentage than 2-bad vote Mike Gravel. Obviously, the number of bad votes would matter to most observers, so I’ll just list for you all of the information.

Obama – 50% fair trade voting record (1/2 votes). He voted right on CAFTA, wrong on the Oman FTA.

Edwards – 63% fair trade voting record (5/8 votes). He voted right on NAFTA for Africa (twice), Chile and Singapore, and Fast Track 2002 (once). He voted wrong on China PNTR and Fast Track 2002 (once). He did not vote on the Australia FTA.

Kucinich – 93% fair trade voting record (14/15 votes). It seems wrong to even give less than 100%, because he just didn’t show for the Morocco FTA vote (meaning one non vote). But in order to be consistent, I’ve got to have non-votes not count towards your fair trade percentage. On everything else, he voted the fair trade position (Fast Track 1998, 2001, 2002, NAFTA for Africa (twice), China PNTR, WTO withdrawal (twice), NAFTA expansions to Chile, Singapore, Australia, Central America, Bahrain and Oman).

Free Traders Trying Desperately to Compete

Free Trade Stuff launches its website and a new line of free trade-related products today. The new company, formed by three recent University of Wisconsin alums, will focus on apparel in its initial stages. The company hopes to expand its line of products to cater to consumers tired of Fair Trade rhetoric.

The company’s first two t-shirt designs include a red shirt with the slogan “tariffs are for wussies” across the chest and a white shirt with a blue hand logo and the words “You’ve been slapped by The Invisible Hand,” a reference to the work of famous economist Adam Smith.

Unfortunately for this entrepreneurial business, in Wisconsin it will be hard to find a market for anti-fair trade products where during the NAFTA/WTO era almost 100,000 manufacturing jobs alone have been lost - and outsourcing continues to climb the skill ladder.

One might say that their business model is not very competitive at least in Wisconsin or perhaps in all of the United States where during the 2006 midterm election there was overwhelming support for fair trade policies and candidates, with 37 seats flipping from NAFTA-supporters to candidates who called for a new direction on American trade policy, including the election of one of the most outspoken members of the freshman class on this issue, Rep. Steve Kagen, a Democrat from Northern Wisconsin.

PS Looking at the website each shirt is $15! Looks like a massive ripoff to me, especially when they're willing to pay the lowest price for labor that they can find anywhere in the world!

August 08, 2007

How to be a pacesetter on trade

Did anyone see the
debates last night? I gotta say, after Monday's statement from the Edwards'
campaign, you could really tell many of the candidates taking it to the next
level on trade policy. Read Edwards' messaging
from Monday, followed by other
candidates' messaging from last night, and you'll see that a lot has been cribbed.

In one category of remarks were Edwards’ trade critiques
that other candidates gladly also made. This includes reforming trade
adjustment assistance (a perennial DC favorite), labor
standards, and hiring some trade prosecutors to “enforce” the agreements on the
books. Some of these are fine ideas, but they are unlikely to be either
meaningfully implemented or to affect the nature of the U.S. workplace
in a fundamental manner. Then there were the category of remarks on currency, tax codes and food safety, which are a little gutsier because they do challenge the corporate bottom line. But some of the candidates followed Edwards' lead on these as well.

So what was new in the debate? For me, the clearest example was Edwards' challenge of corporate power per se, which was picked up on by Obama:

Edwards: "NAFTA was written by insiders in all three countries,
and it served their interests - not the interests of regular workers."

Obama: "And the problem that we’ve had is, is that we’ve had corporate
lobbyists, oftentimes involved in negotiating these trade agreements, but the
AFL-CIO hasn’t been involved; ordinary working people have not been
involved. And we’ve got to make sure that our agreements are good for everybody,
because globalization right now is creating winners and losers. But the
problem is, it’s the same winners and the same losers each and every
time."

Obama was the only other candidate that picked up on Edwards' point. Many candidates talked about their strong support for labor legislation, picket lines and the like. But only Edwards and Obama were willing to draw those class lines, suggesting corporations are pushing for one interest in trade policy, while workers are pushing for another, and then suggesting that they would take the side of the workers.

On Trade, Democracy Is Speaking

Polls in developing countries are notoriously
unreliable, although you occasionally find some good work coming out of
universities. This
latest poll from the University of Costa Rica shows that nearly 60% of
decided voters will oppose CAFTA in the upcoming referendum there. Costa Rica
is the only one of the 7 CAFTA nations not to have ratified the pact, and CAFTA
critic Otton Solis came within a percentage point of becoming president (after
being thought of initially as a long shot candidate). Keep in mind, the level
of opposition to CAFTA is very high in all the CAFTA countries, it's just that
Costa Rica - thanks to the lack of war and U.S. intervention there - has
developed political institutions (including a very forward looking referendum mechanism) that allow popular views to be more clearly
articulated.

August 07, 2007

Deathstar Deal Meets Incan Mathematics

As the congressional recess begins, pro-Deathstar Dems including Reps. Charles Rangel (D-N.Y.), Sander Levin (D-Mich.), and others have traveled down Peru-way for a meet-and-greet with the local pro-FTA forces. As Congress Daily PM reports,

In Lima, Rangel and Levin met Monday with business groups that favor the deal
and with Garcia, sources said. Today's meetings included members of Peru's
parliament and other government officials. The only group opposed to the deal
that secured a meeting with lawmakers was the General Confederation of
Peruvian Workers, a leading trade union, according to Luis Zuniga, president
of CONVEAGRO, an agricultural consortium critical of the deal. Zuniga said he
welcomed the efforts by U.S. lawmakers to push Peru toward implementing labor
reforms in advance of consideration of the deal. "The problem is, those
who want an FTA in Peru are the same ones who do not want labor laws to be
reformed in Peru," Zuniga said through a translator.

And while some press in advance of the trip suggested that pro-Deathstar Democrats were going to require that some changes be made to Peruvian labor law before the U.S. Congress take up consideration of the pact, this too appears to be slipping.

According to Inside U.S. Trade, the deal that the pro-Deathstar Dems hammered out with the Peruvian government will let Peru off the hook for changing most of its laws, instead allowing the president of Peru to make a series of decrees that "will likely not outlaw" bad labor practices, "but clarify that they do not serve to undermine labor rights." Overall, Peru will only address "six out of the 11 issues that House Ways and Means Democratic staff had identified as needing action."

Now, Congress Daily reports that "mock markups" on the Peru FTA could happen in early September.

So, let's get this straight. The Deathstar Deal made less than half of the changes demanded by fair trade groups to the Peru FTA (just to get them not to oppose it). According to these reports today, only about half of the changes demanded on labor rights by the pro-Deathstar Dems are actually being addressed by Peru, mostly through decrees and clarifications rather than by law changes. Now, for those more specialized in Incan mathematics than I, what percentage "good" is this deal?

Drinking, Dieting, Industrial Policy

As I recently noted, Ha-Joon Chang is coming out with a book very soon in the US - "Bad Samaritan: Rich Nations, Poor Policies and the threat to the developing world." The book has spawned a sharp debate over at the Financial Times over the desirability of active trade and industrial policies.

After having studied industrial policies myself, I remember being surprised to hear a presenter at the American Enterprise Institute say that "the arguments for industrial policy don't hold up to closer scrutiny." Granted, any argument for or against industrial policy has to be sensitive to local conditions (landlocked Chad is unlikely to build a successful shipbuilding industry, as Martin Wolf notes), so I didn't quite understand what the presenter was referring to... was the statement meant to discredit the boom years of Latin America in the 1960s, Korea in the 1970s, China in the 1990s? It couldn't have been to celebrate the experience of Latin America or Africa for the last quarter century - during which time practically no industrial policies were practiced (except in Chile, as I talk about here.), right?

So I have still been waiting for further clarification from orthodox economists about what is meant by this pooh-poohing of the lessons of history. Here are the arguments, summarized from the FT debate, with the quick and dirty response taken from Ha-Joon:

Orthodoxy: Dude, industrial policy is so 19th century. Sanity: Latin America, Asian, and Scandinavian development did not happen in the 19th century, dude.

Orthodoxy: Korea didn't use industrial policy (that's why it grew before the late 1970s), except when it did (that's why it didn't grow in the late 1970s, early 1980s). Sanity: That is so 1980s of you. Korea used industrial policy before, during, and after the period in question, and it grew the whole time, except when it didn't, and that was due to a little something called a world recession.

Orthodoxy: Free trade is the best! But if you practice free trade and you don't grow, blame it on on some other policy. Sanity: Where are we, Middle Earth?

The whole debate is worth a read, and it is not as idiotic in tone as I have made it seem. But the days when orthodox economists could shove facts under the rug for 20 years is gone, and you can tell it's causing some growing pains. To part, here are some choice Hajoonisms:

I feel like a man being accused of promoting a copious consumption of
vodka when all I have done is to recommend moderate amount of red wine
as a part of balanced diet.

It may be possible to dismiss the US as an "exception", but if there
are another two dozen countries that have to be dismissed as
"exceptions", then the theory has simply too many holes (the exercise
reminds me of the pre-Copernican practice of drawing "epi-circles" in
order to square evidence with geo-centrism).

I think it is wrong to dismiss one’s opponent’s theory by labelling them
with negative words (‘nineteenth-century’). How would Alan feel if I
described him and his colleagues as "defenders of free-trade theory
that was so strongly advocated by American slave-owners and
opium-trafficking British imperialists"?

I am a man whose book recommending the Mediterranean diet has been
reviewed by a well-known anti-fat dietician, who unintentionally
misrepresented me as praising beneficial qualities of all fats, when I
had only praised olive oil. This was bad enough, but then a few other
anti-fat dieticians read the review, go into a Pavlovian reaction on
seeing the word, "fat", and accuse me of promoting excessive
consumption of all fats, brandishing American obesity figures and
Scottish heart-attack statistics. I regretfully have come to conclusion
that I was absolutely right to say what I said at the end of chapter
three in the book – "Trade is simply too important for economic
development to be left to free trade economists".

August 06, 2007

Ivory Tower Meets The Campaign Stump

Once, many of the issues we talk about on this blog were discussed mostly among Rust Belt labor unions or in street demonstrations. But tough questions are increasingly being asked in a variety of places, from the ivory tower to the campaign stump... and in both instances, the focus is on a change in the rules of globalization, rather than perpetuating the stale debate about whether "yes" or whether "no" on globalization. Witness Harvard's Dani Rodrik's new paper, articulating what he says is now the "new orthodoxy" on trade:

We can talk of a new conventional wisdom that has begun to emerge within multilateral institutions and among Northern academics. This new orthodoxy emphasizes that reaping the benefits of trade and financial globalization requires better domestic institutions, essentially improved safety nets in rich countries and improved governance in the poor countries.

Rodrik goes on to push this new orthodoxy further, articulating what he calls his "policy space" approach, allowing countries to negotiate around opting-in and opting-out more easily of international rules and schemes as their development and domestic needs merit. Citing the controversy around NAFTA's investor-state mechanism and the WTO's challenge of Europe's precautionary approach in consumer affairs, Rodrik poses the following challenge to the orthodoxy:

Globalization is a hot button issue in the advanced countries not just because it hits some people in their pocket book; it is controversial because it raises difficult questions about whether its outcomes are “right” or “fair.” That is why addressing the globalization backlash purely through compensation and income transfers is likely to fall short. Globalization also needs new rules that are more consistent with prevailing conceptions of procedural fairness.

And this focus on a change of rules hit the political arena today, with a major policy speech by former Sen. John Edwards (D-N.C.). See here. Among the important points, that thus far are only being articulated by Edwards among the top candidates:

For years now, Washington has been passing trade deal after trade
deal that works great for multinational corporations, but not for
working Americans. For example, NAFTA and the WTO provide unique rights for foreign
companies whose profits are allegedly hurt by environmental and health
regulations. These foreign companies have used them to demand
compensation for laws against toxins, mad cow disease, and gambling -
they have even sued the Canadian postal service for being a monopoly.
Domestic companies would get laughed out of court if they tried this,
but foreign investors can assert these special rights in secretive
panels that operate outside our system of laws.

The trade policies of President Bush have devastated towns and
communities all across America. But let's be clear about something -
this isn't just his doing. For far too long, presidents from both
parties have entered into trade agreements, agreements like NAFTA,
promising that they would create millions of new jobs and enrich
communities. Instead, too many of these agreements have cost us jobs
and devastated many of our towns.

NAFTA was written by insiders in all three countries, and it served
their interests - not the interests of regular workers. It included
unprecedented rights for corporate investors, but no labor or
environmental protections in its core text. And over the past 15 years,
we have seen growing income inequality in the U.S., Mexico and Canada.

Today, our trade agreements are negotiated behind closed doors. The
multinationals get their say, but when one goes to Congress it gets an
up or down vote - no amendments are allowed. No wonder that
corporations get unique protections, while workers don't benefit.
That's wrong.

So, our movement has made real progress when things like Chapter 11, Fast Track and the precautionary principle are even being discussed by politicians and academics in the context of trade policy debates. And hopefully Edwards' raising of these issues will put pressure on the other candidates to follow suit. In the meantime, you can help turn the nice words into action by clicking here.

August 03, 2007

From YKos: Andy Stern and Harold Meyerson Keynote

Live blogging from Yearly Kos: Harold Meyerson interviewed Andy Stern, president of the Service Employees International Union (SEIU) about the impact of globalization on America's workforce.

Andy Stern gave an inspiring speech focusing on the domestic policies that will help organize workers, and support workers like health care and pensions but only briefly addressed the root of the problem - NAFTA-style trade agreements (this avoidance of the underlying issue unforrtunately seems to be a recurrent theme here at Yearly Kos).

Stern did say that countries not companies are making the rules of the global economy and that of the list of the 100 largest economies, fifty are corporations and fifty are countries. He also gave a brief nod to a new direction on American trade policy when talking about the difficulties of organizing. He explained that current trade rules hold unions and governments hostage. Corporations threaten to leave with their jobs rather than have a unionized workplace and corporations threaten to leave if the public interest laws conflict with their bottom-line.

He continued, "We need to find a way for global progressives to fight global corporations."

Gene Sperling: "[trade adjustment] assistance is the pre-nup of public policy"

Live from Yearly Kos - Panel: What it Means to be a Progressive in a Global Economy with Thea Lee, Chief Economists, AFL-CIO, Austan Goolsbee, professor of economics at the University of Chicago graduate school of business and Gene Sperling, senior fellow for economic policy at the Council on Foreign Relations and the Center for American Progress and moderated by Andrei Cherney, founder and co-editor of Democracy: A Journal of Ideas.

As you may have guessed at first both Sperling and Goolsbee sputtered off the talking point that globalization is inevitable (WRONG/BESIDE THE POINT: of course we could change the rules if the political will existed) and that technology has at least been a cause of the economic insecurities workers in this country feel - and the cause of the loss of jobs, etc. Sperling said that we can not ignore the huge productivity gains and consumer benefits (click to read about the Center for Economic and Policy Research's research that proves the losses in wages far outweigh the gains).

Goolsbee and Sperling insisted that we must shift the focus to what to do now about the inevitable globalization. Some ideas: universal healthcare, energy independence which will drive down gas costs and trade adjustment assistance (though Sperling said he would not instruct a presidential candidate to talk about this first - because it's the equivalent to the "pre-nup of public policy" and to workers it's "a great idea for what I do after I lose my job and am scared to death").

But when the questioning started these guys were just out of answers. Sperling said apologetically that he admits "the final word was not in on globalization." Goolsbee, when asked about the investment rules, shrunk in his seat and said that "this really backfired." Sperling added that progressives should be against international agreements that undermine our domestic environmental and health policies.

Goolsbee continued, "when domestic regulations are challenged on a widescale" in trade tribunals and the US loses, "that will be the end [of these provisions in trade agreements]."

You heard it from him. Tell a friend, tell your elected officials - don't keep making more NAFTA-style agreements that contain these expanded investor rights provisions that even according to NAFTA-advocates have "really backfired."

More about this breakthrough panel and more panels at Yearly Kos to come...

Food safety policy on the move

Inside U.S. Trade had some good news on the food safety front:

The House of Representatives at press time (Aug. 2) was scheduled to take up an agriculture appropriations bill that included more money for the U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS) and report language asking USDA’s Animal and Plant Health Inspection Service (APHIS) to outline a plan for its international activities with its 2009 budget request.

On food safety, the bill granted the full request for FSIS for an increase of $38 million from fiscal year 2007 spending. The committee report called the U.S. food safety system “dangerously inadequate,” pointing as evidence to spinach, seafood, pet food and peanut butter recalls.

The bill also blocked the use of USDA funds to import poultry products from China, which the accompanying report says is due to fears of the H5N1 virus causing avian influenza. The report stated China has “weak government controls,” as well as a high incidence of H5N1, and that there is infrequent U.S. oversight at Chinese processing facilities.

The prohibition would apply to the rule currently in effect that allows imports of U.S. poultry processed in China, and a rule being drafted to allow imports of processed poultry from animals raised in China, the report said.

The poultry news is probably of more consequence. As agroup of famous Canadian philosophers once put it, "Chickity China the Chinese chicken; You have a drumstick and your brain stops tickin."

On the funding "increase," $38 million is equal to only 0.004% of discretionary spending, or about 0.0000775% what we will spend on defense spending that year. Most Americans would probably think that the safety of the food we eat is a lot more important than overseas adventures. Hat tip to the CEPR Budget Calculator for the calculation, and to Tony Corbo at Food & Water Watch for working this issue of Chinese chicken for over a year.

August 02, 2007

Machinists formally come out against Peru and Panama FTAs

We've posted a full letter from the Machinists - a leading AFL-CIO member union - to Congress demanding members' opposition to the Peru and Panama FTAs. You can find the PDF here. Here's an excerpt:

We are writing on behalf of the International Association of Machinists and Aerospace Workers (IAM) to express our opposition to the Panama and Peru Free Trade Agreements. While we applaud the efforts to improve worker rights, these agreements fall far short of satisfying the concerns we have repeatedly raised with respect to a number of issues. In view of the significant losses that IAM members continue to suffer as the result of bad trade agreements, we give especially close scrutiny to any new proposals...